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THE MINISTRY OF FINANCE

THE MINISTRY OF FINANCE

CIRCULAR No.02-TC/TCDN ON JANUARY 14, 1997 PROVIDING GUIDANCE FOR THE MANAGEMENT AND USE OF THE FINANCIAL ASSISTANCE OF THE FRENCH GOVERNMENT IN 1995

Pursuant to Decree No.58-CP of August 30, 1993 of the Government issuing the Regulation on Management and Repayment of Foreign Debts;

Proceeding from Circular No.18-TC/TCDN of March 5, 1994 of the Ministry of Finance providing guidance for the management and use of foreign loans of the Government;

Proceeding from Circular No.42-CP of July 16, 1996 of the Government issuing the Regulation on Management of Investment and Construction;

Proceeding from Note No.1513-QHQT of April 4, 1996, of the Government on the financial regime for projects using financial assistance of the French Government in 1995;

The Ministry of Finance provides the following guidance for the management and use of the financial assistance provided for in the 1995 Financial Protocol signed on November 30, 1995, between the Government of the French Republic and the Government of the Socialist Republic of Vietnam:

I. GENERAL PROVISIONS

1. The financial assistance of the French Government under the 1995 Protocol to the Government of Vietnam (including a grant, a loan from the French Treasury and a loan of combined credits) is a revenue to the State Budget to be accounted for in the State Budget and managed under the current State regime for financial management. The Ministry of Finance has the responsibility to incorporate these loans into the State Budget and repay them to France when they are due (both principal and interest).

2. Given the objectives and characteristics of the use of each capital loan as well as the ability of each project to repay the loans and based on the binding conditions laid down by the French side and the annual ratification of the Vietnamese Government, the projects which are to use the financial assistance under the 1995 Protocol are categorized as follows:

- Projects financed by the State Budget;

- Projects with on-lending from the loans from the French Treasury and the combined credits on conditions of the Vietnamese Government.

3. The Ministry of Finance assumes direct mana-gement over the allocation of capital and the on-lending to finance the corresponding projects through the General Department of Investment and Development.

4. The project owners are allowed to use the financial assistance (including grant and loans) and are responsible for making the annual plan for capital drawing and domestic counterpart funding for each project and submit it to the Ministry of Finance (the Department of International Finance and the General Department of Investment and Development) and the Ministry of Planning and Investment for coordinating, guiding and monitoring the implementation.

5. With regard to the projects which draw capital from grant sources, the project owners are responsible for strictly using the capital as purported and in accordance with the conditions committed in the Commercial Contracts.

With regard to the projects which draw capital from on-lent loans, the project owners are responsible for using and repaying the capital strictly in accordance with the pledges specified in the Credit Contracts (for on-lending) signed with the Ministry of Finance and the provisions on management and use of foreign loans taken by the Government in compliance with the legal documents cited above.

II. DETAILED PROVISIONS

1. Procedure and formalities for drawing borrowed capital and granted aid:

a) The designing, evaluation and approval of feasibility studies must be conducted in accordance with the provisions specified in the Regulation on Management of Investment and Construction issued together with Decree No.42-CP of July 16, 1996, of the Government.

b) On the basis of the projects which have been evaluated and approved by the authorized bodies, the project owners shall quickly carry out the bidding procedures and sign Commercial Contracts with French companies to purchase supplies and services. The commercial contracts must be signed prior to December 31, 1997. After that, the project owners shall complete the formalities for the approval of the Commercial Contracts in compliance with Decision No 91-TTg of November 13, 1992 of the Prime Minister and the guidance of the Ministry of Finance.

c) The documents related to the approval of the feasibility studies, the dossiers of the feasibility studies, the signed Commercial Contracts and the approval documents of the Commercial Contracts shall be sent to the Ministry of Planning and Investment and the Ministry of Finance (the Department of International Finance and the General Department of Investment and Development) for subsequent filling of formalities with the French side.

d) On the basis of the proposals for drawing aid capital for implementation of the Commercial Contracts of the project owners and the announcements of the Vietnamese Government�s ratification of the Commercial Contracts of the Vietnamese Government sent by the Ministry of Planning and Investment to the Commercial Counselor at the French Embassy in Hanoi, the Ministry of Finance shall mandate the Vietnam Bank for Investment and Development to undertake the procedures to draw capital for the projects listed as entitled to use the French financial assistance.

e) On the basis of the note of the Ministry of Finance on mandating the drawing of capital and the copy of the Credit Contracts signed between the Project Owners and the General Department of Investment and Development, the Vietnam Bank for Investment and Development shall sign and seal the original Commercial Contracts to be sent to the French side to be used as payment receipts for the French suppliers, and complete the remaining procedures on foreign relations as specified in the Agreements on Credit.

f) In case the implementation of a project cannot be done or is delayed due to the incompleteness of the procedure dossiers, the project owner shall have to report promptly to the Ministry of Planning and Investment and the Ministry of Finance if he wants to withdraw or change the project, whatever the reason.

2. Implementation of the provision of loans and on-lent loans:

a) For projects which draw capital from the State Budget:

The Ministry of Finance shall through its General Department of Investment and Development carry out the provision of capital for the projects in accordance with the current regime for the allocation and management of capital from the State Budget for capital construction.

As for the projects which draw capital from the grant of the French Treasury, a certificate of aid reception shall be made when the capital is put to use. The project owners, upon receiving notice of aid reception, shall have to come to the Ministry of Finance to making procedures for certification. In case the foreign party orders the supply from sources within the country, the project owners shall process this certificate within 30 days at the latest after receiving the supplies. The dossiers needed for a certification of aid include:

+ The document approving the program or project issued by the authorized agencies.

+ The Treaty or agreement officially signed with the foreign parties which specifies the on-going project.

+ The document of approval of the Commercial Contract.

+ The Bill of Lading or Airway Bill.

+ The Packing List.

+ The Invoice.

+ The Insurance Certificate.

The bills recording revenues and expenditures through the State Budget include:

+ The document to verify the aid reception issued by the Ministry of Finance; or

+ The debt notice issued by the French Development Fund on behalf of the French Treasury and the payment bills for French suppliers (including the bills for payment for technical services) issued by the French commercial representative; or

+ The debt notice issued by the French Bank.

b) For projects which draw capital from on-lent loans:

Upon the approval by authorized agencies of the Commercial Contracts signed by the project owner (or a unit mandated by the project owner to handle the import of the supplies) and a French company, the project owner has to sign a Credit Contract with the Ministry of Finance (the General Department of Investment and Development) on taking the on-lent loans from the aid capital in the State Budget. The Credit Contract will serve as a basis for the project owner to officially recognize his/her debt to the State Budget and his/her obligations as specified in the commitments in this contract.

The conditions for on-lending to the project which draw capital from the finance provided by the French Treasury:

- Terms of the on-lending: 15 years, with a grace period of 4 years.

- Interest rate: 2.5%/year

- Currency: French franc

The conditions on on-lending to the projects which draw capital from the combined credits:

+ The financial source from the French Treasury (32.96% of the total loaned capital for the project):

- Terms of the on-lending: 15 years, with a grace period of 4 years.

- Interest rate: 0%/year (a reduction of 1% compared with the interest on loans from the French Treasury).

- Currency: French franc.

+ The credit from private sources (67.04% of the total loaned capital for the project):

- Terms of on-lending: 10 years without a grace period.

- Interest rate: a reduction of 1% compared with the actual interest rates of the French banks.

- Currency: French franc.

The fees: The project owners are subject to the following fees:

Foreign Fees:

For the projects which draw capital from combined credit sources (including loans from the French Treasury and credits from private sources), the project owners are subject to the following fees:

+ Commitment fee: 0.5%/year of the total of undrawn capital from private credit sources.

+ Service fee for French banks: 0.8% of the total capital to be drawn from private credit sources, to be paid at a time.

+ Credit insurance fee for COFACE: to be paid as announced by the French side and calculated on the total amount of capital from private credit sources.

+ The other fees charged by foreign banks in the course of capital drawing (if any).

Domestic Fees:

All projects which draw capital loans from the State Budget are subject to a fee of 0.3%/year of the total balance of debt, to cover the management fee charged by the General Department of Investment and Development and the foreign transaction fee charged by the Vietnam Bank for Investment and Development.

The General Department of Investment and Development shall directly collect:

+ The domestic fees of 0.3%/year from the project owners according to the scheduled payment of the principal and interest. The fee for foreign transaction shall be collected by the Vietnam Bank for Investment and Development in accordance with the Table of Fee Rates of the Bank on each transaction from the General Department of Investment and Development which shall make the payment out of the said 3% fee.

+ The foreign fees which include the commitment and service fees from the project owners upon receiving the notification from the Bank for Investment and Development so as to give the State Budget a source for repayment to the French side when the loans are due. As for the insurance fee, it shall be given added finance by the French side and added up to the total loan extended to the project owners who shall recognize their debts to the General Department of Investment and Development.

In case a project which is to draw capital from the State Budget, the said foreign fees and fees for foreign transaction shall be covered by the State Budget. The Bank for Investment and Development is responsible for notifying in time the Ministry of Finance (the Department of International Finance and the General Department of Investment and Development) of the fees to be paid.

The General Department of Investment and Development shall notify the schedules for repayment to the State Budget to the project owners. The project owners are responsible for repaying the principal and interest and the fees when they are due according to the said notifications. Project owners are encouraged to repay their debts before due time to the State Budget.

If a project owner fails to repay in due time his debt to the Ministry of Finance for any reasons, he/she shall be subject to the interest rate levied on overdue debts as set by the French side in the Application Agreement (2.5%/year for loans from the French Treasury; and PIBOR+2.5%/year for the credits from private sources).

3. Other provisions:

a) The Ministry of Finance mandates the Vietnam Bank for Investment and Development to carry out the payment services to the French side. Immediately after the drawing of the capital, the Vietnam Bank for Investment and Development shall have to send to the Ministry of Finance an account of capital drawing to be processed for Budget accounting.

b) All the goods, equipment and services which the projects import on French ODA sources provided for under the 1995 Protocol for their own service shall be exempted from import taxes in accordance with guiding Note No 2842-TC/TCT of August 15, 1996 of the Ministry of Finance.

c) Upon closing a project, the project owner is responsible for preparing a statement of accounts on the reception, use and efficiency of the project and send it to the agency in charge of the project and the Ministry of Finance. The procedure and requirement for the making of the statement of accounts, its content and its appraisal shall have to comply with the current guidance of the Ministry of Finance.

III. IMPLEMENTATION:

The agencies in charge of the projects are responsible for guiding the project owners to implement strictly the provisions of this Circular. In the course of the implementation, any problems that arise must be reported in time by the project owners and the agencies in charge to the Ministry of Finance for consideration and settlement.

For the Minister of Finance

Vice Minister

PHAM VAN TRONG